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Monday, September 17, 2012

The Ten Big Lies of Multi-Level Marketing

by
Robert L. Fitzpatrick

The
multi-level marketing (MLM) field grows and its member companies multiply.
Solicitations to join the movement seem to be everywhere. The impression
accordingly grows that it is indeed the wave of the future, a business
model that is gaining momentum, growing in acceptance and legitimacy and, as
its promoters claim, will eventually replace most other forms of marketing and
sales. Many are led to believe the assertions that success can be found by
anyone who faithfully believes in the system and steadfastly adheres to its
methods and that, eventually, all of us will become MLM distributors.

My analysis
of the MLM business is based upon fourteen years experience in corporate
consulting specifically in the distribution field and more than 10 years of
research and writing about the MLM model. This has included serving as expert
witness in state and federal court cases, corresponding directly with more than
1,000 participants, writing a book, being interviewed for local and national
radio, television, newspapers and magazines, and carefully studying numerous
MLM marketing and pay plans.

This
research has shown that the MLM business model, as it is practiced by most
companies, is a marketplace hoax. In those cases, the business is primarily a
scheme to continuously enroll distributors and little product is ever retailed
to consumers who are not also enrolled as distributors.

In general,
MLM industry claims of distributor income potential, its descriptions of the
"network" business model and its prophecies of a reigning destiny in
product distribution have as much validity in business as UFO sightings do in
the realm of science.

Financially,
the odds for an individual to achieve financial success under those
circumstances rival the odds of winning at the tables in Las Vegas.

The very
legality of the MLM system rests tenuously upon a single 1979 ruling on one
company. The guidelines for legality that are set forth in that ruling are
routinely ignored by the industry. Lack of governing legislation or oversight
by any designated authority also enables the industry to endure despite
occasional prosecutions by state Attorneys General or the FTC.

MLM is not
defined and regulated like, for instance, franchises are. MLMs can be
established without federal or state approval. There is no federal law
specifically against pyramid schemes. Many state anti-pyramid statutes are
vague or weak. State or federal regulation usually involves first proving that
the company is a pyramid scheme. This process can take years and by then, the
damage to consumers is done. Indeed, even when MLM pyramids are shut down,
often the promoters immediately set up new companies under new names and resume
scamming the public.MLM's
economic score card is characterized by massive failure rates and financial
losses for millions of consumers. Its structure in which positions on an
endless sales chain are purchased by selling or buying goods is mathematically
unsustainable and its system of allowing unlimited numbers of distributors in
any market area is inherently unstable.

MLM's
espoused core business - personal retailing - is contrary to trends in
communication technology, cost-effective distribution, and consumer buying
preferences. The retailing activity is, in reality, only a pretext for the
actual core business - enrolling investors in pyramid organizations that
promise exponential income growth.LIE NO 1

As in all
pyramid schemes, the incomes of those distributors at the top and the profits
to the sponsoring corporations come from a continuous influx of new investors
at the bottom. Viewed superficially in terms of company profits and the wealth
of an elite group at the pinnacle of the MLM industry, the model can appear
viable to the uninformed, just as all pyramid schemes do before they collapse
or are exposed by authorities.

Deceptive
marketing that ably plays upon treasured cultural beliefs, social and personal
needs, and some economic trends account for MLM's growth, rather than its ability
to meet any consumer needs. The deceptive marketing is nurtured by a general
lack of professional evaluation or investigation by reputable business media.
Consequently, a popular delusion is supported that MLM is a viable business
investment or career choice for nearly everyone and the odds of financial
success in the venture are comparable or better than other trades, professions,
employment or business ventures.

MLM's
true constituency is not the consuming public but rather hopeful investors. The
market for these investors grows significantly in times of economic transition,
globalization and employee displacement. Promises of quick and easy financial
deliverance and the beguiling association of wealth with ultimate happiness
also play well in this market setting. The marketing thrust of MLM is
accordingly directed to prospective distributors, rather than product
promotions to purchasers. Its true products are not long distance phone
services, vitamin pills, health potions or skin lotions, but rather the
investment propositions for distributorships, which are deceptively portrayed
with images of high income, minimal time requirements, small capital
investments and early success.

The word,
lie, is provoking and it is used here for provocative purposes. At some
level, everyone who participates in MLM in which little retailing is occurring
is unconsciously lying to himself or herself. Many at the top of these
organizations are consciously lying to everyone else. Deception is inherent in
this type of MLM scheme and is pervasive in its marketing. Here are 10 of the
biggest lies I have found to be present in almost every MLM I have encountered.

Lie #1:
MLM is a business offering better opportunities for making large sums of money
than all other conventional business and professional models.

Truth: For
almost everyone who invests MLM turns out to be a losing financial proposition.
This is not an opinion, but a historical fact. Consider some notable examples
from among the largest MLMs.

In the largest of all MLMs, Amway, only 1/2 of one percent of all
distributors make it to the basic level of "direct" distributor, or
"platinum," and the average income of all Amway distributors is about
$40 a month. That is gross income before taxes and expenses. When costs are
factored, it is obvious that nearly all suffer a loss. Making it to direct,
however, is not a ticket to profitability, but to greater losses. When the
Wisconsin Attorney General filed charges against Amway, tax returns from all
distributors in the state revealed an average net loss of $918 for that state's
direct distributors.

Extraordinary sales and marketing obstacles account for much of this failure,
but even if the business were more feasible, sheer mathematics would severely
limit the opportunity. The MLM type of business structure can support only a
small number of financial winners. If a 1,000-person downline is needed to earn
a sustainable income, those 1,000 will need one million more to duplicate the
success. How many people can realistically be enrolled? Much of what appears as
growth is in fact only the continuous churning of new enrollees. The money for
the rare winners comes from the constant enrollment of armies of losers.

The vast majority of the losers in MLM drop out within a year. In
a 1999 court case brought against Melaleuca, one of the country's largest MLMs,
the company claimed it has the highest retention rate among distributors
in the entire MLM industry. Melaleuca boasted a drop-out rate is 5.5% per
month. This equates to about 60% per year, if the dropouts are replaced each
month.

In its annual report to the SEC, Pre-Paid Legal, another large
MLM, revealed that more than 1/2 of all its customers and distributors quit
each year and are replaced by another group of hopeful investors.

This pattern of 50-70% of all distributors quitting within one
year holds true also for NuSkin, the industry's second largest MLM. NuSkin also
exemplifies the accompanying pattern in which a tiny percent of the
distributors gain the majority of all company rebates. In 1998, NuSkin paid out
2/3rds of its entire rebates to just 200 upliners out of more than 63,000 active
distributors. The money they received came directly from the unprofitably
investments of the 99.7% of the others.

In 1995, Excel Communications, another fast growing MLM,
reported to regulators an 86% turnover rate of distributors and 48% drop-out
rate among all customers.

To
obscure their dismal numbers, some MLMs classify their distributors as active
and inactive. The Active group includes only recent participants and
those still buying products or receiving rebates. Payout and retention
statistics are then disclosed only on the active group.

If ALL
distributors who participate are included the losses and the average incomes
are exposed as much worse. And, if all the distributors who enroll and quit
over several years are included, the odds of success for a new
distributor/investor are shown to be absurdly low. Yet, these companies
typically advertise their business as an opportunity of a life time with
unlimited potential.

LIE NO 2

Lie
#2: Network marketing is the most popular and effective new way to bring
products to market. Consumers like to buy products on a one-to-one basis in the
MLM model.

Truth: If you strip MLM of
its hallmark activity of continuously reselling distributorships and examine
its foundation, the one-to-one retailing of products to customers, you
encounter an unproductive and impractical system of sales upon which the entire
structure is supposed to rest. Personal retailing is a thing of the past, not
the wave of the future. Retailing directly to friends on a one-to-one basis
requires people to drastically change their buying habits. They must restrict
their choices, often pay more for goods, buy inconveniently, and awkwardly engage
in business transactions with close friends and relatives. The unfeasibility of
door-to-door retailing is why MLM is, in reality, a business that just keeps
reselling the opportunity to sign up more distributors.

Lie #3: Eventually all
products will be sold by MLM, a new form of marketing. Retail stores, shopping
malls, catalogues and most forms of advertising will soon be rendered obsolete
by MLM.

Truth: MLM is not new. It
has been around since the late 1960's. Yet, today it still represents less than
one percent of US retail sales. In year 2000, total US retail sales were $3.232
trillion, according to the Dept. of Commerce. MLM's total sales are about $10
billion. That is about 1/3rd of one percent and most of this sales volume is
accounted for by the purchases of hopeful new distributors who are actually
paying the price of admission to a business they will soon abandon. Not only
are MLM sales insignificant in the marketplace, but MLM fails as a sales model
also on the other key factor - maintaining customers. Most MLM customers quit
buying the goods as soon as they quit seeking the business opportunity.
There is no brand loyalty.These basic
facts show that, as a marketing model, MLM is not replacing existing forms of
marketing. It does not legitimately compete with other marketing approaches at
all. Rather, MLM represents a new investment scheme that uses the language of
marketing and sales of products. Its real products are distributorships which
are sold with misrepresentation and exaggerated promises of income. People are
buying products in order to secure positions on the sales pyramid. The
possibility is always held out that you may become rich if not from your own
efforts then from some unknown person who might join your downline, the big
fish as they are called.

MLM's growth
is a manifestation not of its value to the economy, customers or distributors
but of the recently high levels of economic fear and insecurity and rising
expectations of quick and easy wealth. It is growing in the same way day
trading on the stock market, legalized gambling and lotteries are.

Lie #4: MLM is a new way of
life that offers happiness and fulfillment. It is a means to attain all the
good things in life.

Truth: The most prominent
motivating appeal of the MLM industry as shown in industry literature and
presented at recruitment meetings is the crassest form of materialism. Fortune
100 companies would blush at the excess of promises of wealth and luxury put
forth by MLM solicitors. These promises are presented as the ticket to personal
fulfillment. MLM's overreaching appeal to wealth and luxury conflicts with most
people's true desire for meaningful and fulfilling work in something in which
they have special talent or interest. In short, the culture of this business side
tracks many people from their personal values and desires to express their
unique talents and aspirations.

Lie #5: MLM is a spiritual
movement.

Truth: The use of spiritual
concepts like prosperity consciousness and creative visualization to promote MLM
enrollment, the use of words like communion to describe a sales
organization, and claims that MLM is a fulfillment of Christian principles or
Scriptural prophecies are great distortions of these spiritual practices. Those
who focus their hopes and dreams upon wealth as the answer to their prayers
lose sight of genuine spirituality as taught by all the great religions and
faiths of humankind. The misuse of these spiritual principles should be a
signal that the investment opportunity is deceptive. When a product is wrapped
in the flag or in religion, buyer beware! The community and support
offered by MLM organizations to new recruits are based entirely upon their
purchases. If the purchases and enrollment decline, so does the communion.

Lie #6: Success in MLM is
easy. Friends and relatives are the natural prospects. Those who love and
support you will become your lifetime customers.

Truth: The
commercialization of family and friendship relations or the use of warm
leads which is required in the MLM marketing program is a destructive
element in the community and very unhealthy for individuals involved.
Capitalizing upon family ties and loyalties of friendships in order to build a
business can destroy ones social foundation. It places stress on relationships
that may never return to their original bases of love, loyalty and support.
Beyond its destructive social aspects, experience shows that few people enjoy
or appreciate being solicited by friends and relatives to buy products.

Lie #7: You can do MLM in
your spare time. As a business, it offers the greatest flexibility and personal
freedom of time. A few hours a week can earn a significant supplemental income
and may grow to a very large income making other work unnecessary

Truth: decades of
experience involving millions of people have proven that making money in MLM
requires extraordinary time commitment as well as considerable personal
wiliness, persistence and deception. Beyond the sheer hard work and special
aptitude required, the business model inherently consumes more areas of ones
life and greater segments of time. In MLM, everyone is a prospect. Every waking
moment is a potential time for marketing. There are no off-limit places, people
or times for selling. Consequently, there is no free space or free time once a
person enrolls in MLM system.Under the
guise of creating money independently and in your free time, the system gains
control and dominance over people's entire lives and requires rigid conformity
to the program. This accounts for why so many people who become deeply involved
end up needing and relying upon MLM desperately. They alienate or abandon other
sustaining relationships.

Lie #8. MLM is a positive,
supportive new business that affirms the human spirit and personal freedom.

Truth: MLM marketing
materials reveal that much of the message is fear-driven and based upon
deception about income potential. Solicitations frequently include dire
predictions about the impending collapse of other forms of distribution, the
disintegration or insensitivity of corporate America, and the lack of
opportunity in other professions or services. Conventional professions, trades
and business are routinely demeaned and ridiculed for not offering unlimited
income. Employment is cast as wage enslavement for losers. MLM is
presented as the last best hope for many people. This approach, in addition to
being deceptive, frequently has a discouraging effect on people who otherwise
would pursue their own unique visions of success and happiness. A sound
business opportunity does not have to base its worth on negative predictions
and warnings.

Lie #9. MLM is the best
option for owning your own business and attaining real economic independence.

Truth: MLM
is not true self-employment. "Owning" an MLM distributorship is an
illusion. Some MLM companies forbid distributors from carrying additional
lines. Most MLM contracts make termination of the distributorship easy and
immediate for the company. Short of termination, downlines can be taken away
with a variety of means. Participation requires rigid adherence to the duplication
model, not independence and individuality. MLM distributors are not
entrepreneurs but joiners in a complex hierarchical system over which they have
little control.

Lie #10: MLM is not a
pyramid scheme because products are sold.

Truth: The sale of products
is in no way a protection from anti-pyramid scheme statutes or unfair trade
practices set forth in federal and state law. MLMs that sell useful, quality
products have been successfully prosecuted under anti-pyramid scheme laws by
state and federal officials. MLM is a legal form of business only under certain
rigid conditions set forth by the FTC and state Attorneys General. Many MLMs
are currently in gross violation of these guidelines and operate only because
they have not been prosecuted. Recent court rulings are using a 70% rule to
determine an MLM's legality. At least 70% of all goods sold by the MLM company
must be purchased by non-distributors. This standard would place most MLM
companies outside the law. The largest of all MLMs acknowledges that only 18%
of its sales are made to non-distributors.

Friday, September 14, 2012

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Friday, September 7, 2012

Authorized message from PC IT dept:: We are aware that in the past few days, some members are not seeing the same countdown time to our official launch - to Fund, Buy & Surf, etc...

IT upgraded the existing countdown and all of us should now see a "universal" countdown timer regardless of our timezones and even if we have the wrong time on our computer.

You may also notice that the countdown goes up again. With the placement of more high-speed severs, our IT Team is needing more time to ensure that everything will run as smoothly as possible the moment we officially launch and open the doors for our valued members to Fund, Surf, Buy and all the activities that our members do on a regular basis.

We truly appreciate your excitement and anticipation of our launching and we appreciate your understanding on this "necessary" technical delay.